Are bank lending shocks important for economic fluctuations?

Jørn Halvorsen () and Dag Henning Jacobsen
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Dag Henning Jacobsen: Norges Bank (Central Bank of Norway)

No 2009/27, Working Paper from Norges Bank

Abstract: We analyze the importance of bank lending shocks on real activity in Norway and the UK, using structural VARs and based on quarterly data for the past 21 years. The VARs are identified using a combination of sign and short-term zero restrictions, allowing for simultaneous interaction between various variables. We find that a negative bank lending shock causes output to contract. The significance of bank lending shocks seems evident as they explain a substantial share of output gap variability. This suggests that the banking sector is an important source of shocks. The empirical analysis comprises the Norwegian banking crisis (1988-1993) and the recent period of banking failures and recession in the UK. The results are clearly non-negligible also when omitting periods of systemic banking distress from the sample.

Keywords: Identification; VAR; Monetary Policy; Bank lending. (search for similar items in EconPapers)
Pages: 34 pages
Date: 2009-12
New Economics Papers: this item is included in nep-ban, nep-cba, nep-eec, nep-mac and nep-mon
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:bno:worpap:2009_27

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